On January 1, 2014, Nami Inc.’s ledger shows its capital asset of $79,000 (at cost) and accumulated depreciation of $28,125. When the capital asset was purchased, Nami estimated that its useful life would be 12 years. On July 1, 2014, Nami paid $18,000 for property betterment and, as a result, it estimated its residual value had increased from $4,000 to $6,000; as well, the useful life had increased by 2.5 years. Nami uses straight-line amortization. On October 1, 2016, Nami sold the capital asset for $45,000.
1. What was the age of the capital asset as of January 1, 2014? What was the annual depreciation amount?
2. Prepare the journal entry to record the betterment.
3. Prepare the adjusting entry for the depreciation expense at the end of the year.
4. What is the impact on the income statement after the betterment has been completed?
5. Prepare the journal entry to record the disposal of the capital asset.

  • CreatedJuly 08, 2015
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